Brazilian stocks rise on euro pledge

LOS ANGELES (MarketWatch) — Brazilian stocks climbed Thursday, gaining with other markets world-wide after a key European official pledged to preserve the region’s shared currency.

Shares of Vale SA contributed to the rise in Brazil’s equity benchmark as they fought off losses that followed downbeat quarterly results from the world’s largest iron ore miner.

Mexican, U.S. and European stocks also rose after European Central Bank President Mario Draghi said the institution will do whatever it needs to do to save the euro. Economists said Draghi’s remarks signal that he’s ready for the central bank to resume a bond-buying program. See story about Draghi's euro pledge.

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While markets “welcomed” Draghi’s pledge to do “whatever it takes” to save the euro, the region’s crisis “is as much about growth as it is about debt,” John Higgins, senior markets economist at Capital Economics, wrote Thursday. “Buying sovereign bonds does nothing to address the fundamental problem of a lack of competitiveness that plagues troubled euro-zone countries.”

In São Paulo, the Ibovespa (BVSP) rose 2.7% to 54,002.72, with gains in home-building, retail, communications, and consumer discretionary shares leading the way. Shares of oil company Petrobras
PBR, -0.73%
(PETR4) also found higher ground, rising 1.4%.

Preferred shares of market heavyweight Vale
VALE, +1.35%
(VALE5) ended 0.8% higher, turning around losses of more than 3% that came after the world’s largest iron-ore miner late Wednesday posted a 59% fall in second-quarter profit to $2.66 billion. The result missed expectations for a profit of $3.4 billion. Operating revenue dropped 21% to $12.2 billion, shy of the consensus estimate of $12.4 billion.

Vale’s report reflected lower prices for iron ore and nickel, which the company also mines, and the impact from the Brazilian currency’s depreciation against the U.S. dollar, among other factors. Read about Vale's financial results.

Vale’s shares in the short-run are likely to “remain volatile due to the weaker-than-expected results, the upward revision in capex estimates for some projects and concerns on steel production cuts in China,” Deutsche Bank analyst Rodrigo Barros wrote early Thursday.

Most other stocks in the Ibovespa’s steel group moved higher, with Usiminas (USIM5) up 5.1% and Gerdau
GGB, +0.58%
higher by 3.6%.

Meanwhile, the Mexican and U.S. stocks also found upside support Thursday after reports from the U.S. showed weekly applications for jobless claims dropped sharply and that orders for durable goods rose in June. Improvement in the U.S. economy are important for Mexico, which sends about 80% of its goods to its neighbor. Read more about U.S. stocks.

Mexico’s IPC (IPC) advanced 1.3% to 40,977.32, with shares of retailer Comerci (COMERCIUBC) higher by 4.6% following a 12% rise in second-quarter profit.

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